THIRD DIVISION

[G.R. No. 172927. February 11, 2010.]

RONILO SORREDA , petitioner, vs . CAMBRIDGE ELECTRONICS

CORPORATION , 1 respondent.

DECISION

CORONA , J : p

This petition 2 seeks to reverse and set aside the May 26, 2005 decision 3 of the Court of
Appeals (CA) in CA-G.R. SP No. 77303 and its resolution denying reconsideration. 4 The CA
affirmed the resolution 5 of the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 028156-01 declaring that petitioner Ronilo Sorreda was not a regular employee of
respondent Cambridge Electronics Corporation. EHCcIT

On May 8, 1999, petitioner was hired by respondent as a technician for a period of 5

months at minimum wage. 6 Five weeks into the job (on June 15, 1999), petitioner met an
accident in which his left arm was crushed by a machine and had to be amputated. 7
Petitioner claimed that, shortly after his release from the hospital, officers of respondent
company called him to a meeting with his common-law wife, father and cousin. There he
was assured a place in the company as a regular employee for as long as the company
existed and as soon as he fully recovered from his injury.
In September 1999, after he recovered from his injury, petitioner reported for work.
Instead of giving him employment, they made him sign a memorandum of resignation to
formalize his separation from the company in the light of the expiration of his five-month
contract.
On November 16, 1999, petitioner filed in the Regional Arbitration Branch of the NLRC of
Dasmariñas, Cavite a complaint 8 for illegal dismissal (later changed to breach of
contract). In his position paper, he raised the following issues:
1. whether there was a valid agreement or contract of perpetual
employment perfected between the parties concerned;
2. whether respondent corporation was bound thereby; and
3. whether [petitioner] has a cause of action for damages against
respondent based on the contract. 9
He claimed that respondent failed to comply with the terms of the contract of perpetual
employment which was perfected in June 1999 when he was called to a meeting by
management. 1 0 He prayed that respondent be made to pay compensatory, 1 1 moral 1 2
and exemplary damages and attorney's fees for default or breach of contract.
Respondent denied that it extended regular employment to petitioner. Only words of
encouragement were offered but not perpetual employment. Moreover, it assailed the
labor arbiter's jurisdiction over the case, claiming a lack of causal connection between the
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 alleged breach of contract and their employer-employee relationship. HIESTA

The labor arbiter held that he had jurisdiction to hear and decide the case as it involved the
employer-employee relationship of the contending parties. He ruled that petitioner who
had been employed on a per-project basis became a regular employee by virtue of the
contract of perpetual employment. He stated that the positive declaration of the
witnesses (common-law wife, father and cousin) present at the meeting and the parole
evidence rule was enough to support the petitioner's claim. Thus, in a decision dated
March 9, 2001, the labor arbiter ruled that petitioner was employed by respondent for an
indefinite period of employment (that is, on regular status.) He ordered petitioner's
reinstatement and the payment of backwages, moral damages and exemplary damages as
well as attorney's fees. 1 3
Both petitioner and respondent appealed to the NLRC. Petitioner claimed that the labor
arbiter erred in finding that he was a regular employee, that the case was based on illegal
dismissal and that reinstatement and payment of backwages were the proper reliefs.
Respondent, on the other hand, asked for the reversal of the labor arbiter's decision based
on grave abuse of discretion for assuming jurisdiction over the case.
The NLRC agreed with respondent. 1 4 It found that petitioner was not a regular employee;
thus, he was neither illegally dismissed nor entitled to reinstatement and backwages.
Petitioner sued for compensatory damages because of the accident that befell him. As the
contract for per-project employment had already expired, the issue no longer fell under the
jurisdiction of the labor arbiter and NLRC. Moreover, the testimonies of petitioner's
witnesses were declared self-serving and thus insufficient to prove the contract of
perpetual employment. The motion for reconsideration of petitioner was denied. 1 5
Aggrieved, petitioner filed a petition for certiorari 1 6 in the CA questioning the NLRC's
finding of non-existence of the contract of perpetual employment.
The CA dismissed the petition for lack of merit, stating that the labor arbiter decided the
case on an issue that was never raised (i.e., the employment status of petitioner).
Moreover, petitioner's principal cause of action, breach of contract, was not cognizable by
the labor courts but by the regular courts. 1 7 The CA concluded that the NLRC did not
commit any reversible error in finding that the labor arbiter had no jurisdiction over the
case. Furthermore, petitioner failed to prove grave abuse of discretion in the NLRC's
exercise of its quasi-judicial function.
DTAESI

Petitioner moved for reconsideration but the motion was denied. 1 8 Thus, this petition.
We affirm the Court of Appeals.
This case rests on the issue of whether the labor arbiter had the jurisdiction to take
cognizance thereof.
Jurisdiction over the subject matter of a complaint is determined by the allegations of the
complaint. 1 9 In Pioneer Concrete Philippines, Inc. v. Todaro, 2 0 the Court reiterated that
where no employer-employee relationship exists between the parties, and the Labor Code
or any labor statute or collective bargaining agreement is not needed to resolve any issue
raised by them, it is the Regional Trial Court which has jurisdiction. Thus it has been
consistently held that the determination of the existence of a contract as well as the
payment of damages is inherently civil in nature. 2 1 A labor arbiter may only take
cognizance of a case and award damages where the claim for such damages arises out of
an employer-employee relationship. 2 2
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 In this instance, petitioner, from the period May 8, 1999 to October 8, 1999, was clearly a
per-project employee of private respondent, resulting in an employer-employee
relationship. Consequently, questions or disputes arising out of this relationship fell under
the jurisdiction of the labor-arbiter.
However, based on petitioner's allegations in his position paper, his cause of action was
based on an alleged second contract of employment separate and distinct from the per-
project employment contract. Thus, petitioner insisted that there was a perfected contract
of perpetual employment and that respondent was liable to pay him damages.
We note, however, that petitioner filed the case only when respondent refused to rehire
him. 2 3
While there was an employer-employee relationship between the parties under their five-
month per-project contract of employment, the present dispute is neither rooted in the
aforestated contract nor is it one inherently linked to it. Petitioner insists on a right to be
employed again in respondent company and seeks a determination of the existence of a
new and separate contract that established that right. As such, his case is within the
jurisdiction not of the labor arbiter but of the regular courts. The NLRC and the CA were
therefore correct in ruling that the labor arbiter erroneously took cognizance of the case.
HCEcAa

Even assuming arguendo that the labor arbiter had the jurisdiction to decide the case, the
Court cannot countenance petitioner's claim that a contract of perpetual employment was
ever constituted. While the Constitution recognizes the primacy of labor, it also recognizes
the critical role of private enterprise in nation-building and the prerogatives of
management. A contract of perpetual employment deprives management of its
prerogative to decide whom to hire, fire and promote, and renders inutile the basic
precepts of labor relations. While management may validly waive it prerogatives, such
waiver should not be contrary to law, public order, public policy, morals or good customs.
2 4 An absolute and unqualified employment for life in the mold of petitioner's concept of
perpetual employment is contrary to public policy and good customs, as it unjustly forbids
the employer from terminating the services of an employee despite the existence of a just
or valid cause. It likewise compels the employer to retain an employee despite the
attainment of the statutory retirement age, even if the employee has became a "non-
performing asset" or, worse, a liability to the employer.
Moreover, aside from the self-serving claim of petitioner, there was no concrete proof to
establish the existence of such agreement. Petitioner cannot validly force respondent to
enter into a permanent employment contract with him. Such stance is contrary to the
consensuality principle of contracts as well as to the management prerogative of
respondent company to choose its employees.
WHEREFORE , the petition is hereby DENIED .
Costs against petitioner.
SO ORDERED .
Velasco, Jr., Nachura, Peralta and Mendoza, JJ., concur.

Footnotes

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 1. The National Labor Relations Commission was impleaded as respondent but was
excluded by the Court pursuant to Section 4, Rule 45 of the Rules of Court.

2. Under Rule 45 of the Rules of Court.

3. Penned by Associate Justice Amelita G. Tolentino and concurred in by Associate
Justices Roberto A. Barrios (deceased) and Vicente S.E. Veloso of the Ninth Division of
the Court of Appeals. Rollo, pp. 219-231.

4. Dated October 7, 2005. Id., pp. 238-239.

5. Dated June 26, 2002 and penned by Commissioner Amelia A. Gacutan and concurred in
by Presiding Commissioner Roy N. Señeres and Commissioner Victoriano R. Calaycay.
Id., pp. 170-183.
6. Contract of Employment for Specific Project or Undertaking. Id., p. 135.

7. Costs of the operation were borne by respondent.

8. Docketed as NLRC RAB-IV-1-11869-00-C, rollo, p. 136.

9. Id., p. 138.
10. Pertinent portion of the Position Paper stated:
"When complainant finally saw that respondent had no intention of making good on
their earlier agreement or understanding, and re-employing him again as a worker, he
filed his complaint with the Department of Labor and Employment. Hence, the instant
case." (emphasis supplied)
Id.
11. P1,053,000, id., p. 6.
12. P200,000, id.
13. Id., p. 169.
14. Docketed as NLRC NCR CA No. 028156-01, Id., pp. 170-183.
15. Dated December 11, 2002.

16. Under Rule 65 of the Rules of Court. Docketed as CA-G.R. SP. No. 77303.
17. The CA stated:

The petitioner did not ask for any relief under the Labor Code. He sought to recover
damages under the alleged JUNE CONTRACT as a redress for the private respondent's
breach of its contractual obligation to his prejudice. Indeed, the public respondent has no
jurisdiction over the complaint. Thus whether or not an enforceable contract, albeit
implied and innominate, had arisen between the respondent corporation and the
petitioner under the circumstances of this case, and if so, whether or not it had been
breached, are preeminently legal questions, questions not to be resolved by referring to
labor legislation, having nothing to do with wages or other terms and conditions of
employment, but rather having recourse to our law on contracts.

18. Supra, note 4.

19. San Miguel Corp. v. NLRC, G.R. No. 108001, 15 March 1996, 325 Phil. 401, 414.

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 20. G.R. No. 154830, 8 June 2007, 524 SCRA 153, 163.
21. Dai-chi Electronics Manufacturing Corporation v. Villarama, G.R. No. 112940, 21
November 1994; Yusen Air and Sea Service Philippines, Inc. v. Villamor, G.R. No. 154060,
16 August 2005, 467 SCRA 167, 172.
22. Article 217 (a) LABOR CODE OF THE PHILIPPINES provides:

(a) Except as otherwise provided under this Code, the Labor Arbiters shall have
original jurisdiction to hear and decide within thir ly (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:

xxx xxx xxx

(1) Claims for actual, moral, exemplary and other forms of damages arising from
the employer-employee relations ;
xxx xxx xxx (emphasis supplied)

23. See note 11.

24. See Article 6, NEW CIVIL CODE.

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